Brazil negotiates with Bamin, VLI and Rumo to move Fico-Fiol rail auction forward

Brazil’s federal government is working through a set of contract renegotiations and financial rebalancing talks with Bamin, VLI and Rumo in an effort to launch the concession auction for the Fico-Fiol rail corridor later this year.

The corridor would connect the Center-West Integration Railway, known as Fico, with the West-East Integration Railway, or Fiol.

The government’s main priority is to clear the way for Bamin’s sale to Mota-Engil, a deal seen as essential to making the auction viable. Bamin holds the concession for the first section of Fiol, linking Caetité to Ilhéus, in Bahia, which still needs to be completed. The company also needs to build a port in Ilhéus. Without those two projects, the corridor would lack direct access to a port, reducing its appeal to investors.

The Bamin sale is in the final stage of review by Brazil’s land transport regulator, ANTT.

The Fico-Fiol corridor the government plans to auction would link Mara Rosa, in Goiás, to Caetité, where it would connect with the first stretch of Fiol.

The Fico section in the Center-West is being built by Vale. The line between Água Boa, in Mato Grosso, and Mara Rosa is part of obligations assumed by the mining company under the early renewal of other rail concessions. Under an agreement with Vale, which is being renegotiated and is expected to be formalized by September, the first section of the railway, running to Cocalinho, in Mato Grosso, should be completed by 2028.

The Fiol section to be included in the new concession is being built by the government. One stretch, between Caetité and Correntina, in Bahia, is expected to be carried out with public investment, while the remaining works will be the responsibility of the future concessionaire.

Another key factor for the corridor’s economic viability is its connection with the North-South Railway in Mara Rosa. The government is therefore also pursuing contract adjustments with Rumo and VLI, the operators of the rail sections that provide that link.

On the North-South stretch connected to the Fico-Fiol corridor, Rumo operates the section between Estrela D’Oeste, in São Paulo, and Porto Nacional, in Tocantins. VLI operates the stretch between Porto Nacional and Açailândia, in Maranhão, which connects with Maranhão ports and the Carajás Railway.

In Rumo’s case, the government’s main goal is to secure enough transport capacity to absorb the additional cargo expected from the new corridor. The company says its contract sets a limit of 30 tonnes per axle, while the government wants operations guaranteed at 32.5 tonnes per axle.

Rumo argues that increasing capacity would entitle it to a contract rebalancing of about R$650 million, reflecting higher maintenance costs and the need to reinforce rail infrastructure.

The dispute predates the Fico-Fiol project. VLI, which already uses Rumo’s section to move cargo toward the Port of Santos, has for years defended the 32.5-tonne axle-load standard. ANTT had previously ruled that this limit was already provided for in the contract and that Rumo was not entitled to compensation. Rumo appealed the decision, triggering arbitration.

More recently, Rumo also opened an economic-financial rebalancing process to address the issue. The government hopes to settle the dispute because it sees the matter as important to the viability of the Fico-Fiol concession.

Negotiations are also under way with VLI over pending issues related to the northern section of the North-South Railway. The government wants to use that process to include capacity-expansion works, such as the construction of a rail loop.

According to industry sources, VLI is among the potential bidders for the future Fico-Fiol concession.

Under the federal government’s timetable, the tender notice is expected to be published in September, with the auction planned for December. The project is expected to receive public funding from the renegotiation of Vale’s rail contracts.

Industry participants see the schedule as tight and say it will be challenging to bring the auction to market on time, given the number of negotiations still in progress. Even so, expectations are that the project will continue to move forward and be implemented in the coming years.

Bamin and Rumo did not comment. VLI said that, as a major player in the sector, it evaluates all projects under way but does not comment in advance on potential participation. The company added that it takes part in discussions on expanding the region’s logistics capacity, but said decisions on new rail infrastructure are the responsibility of the federal government. ANTT did not comment.

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Source: Valor Econômico

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